Federal budget surplus should benefit all Canadians

Centre calls for social reinvestment and fair tax reform

November 23, 1999

(Vancouver) The Canadian Centre for Policy Alternatives--BC Office (CCPA-BC) is calling on Finance Minister Paul Martin to reject calls for across the board tax cuts in this year's federal budget. CCPA-BC Director Seth Klein and Economist Marc Lee appeared before the House of Commons Standing Committee on Finance this afternoon. The Finance Committe is conducting its annual pre-budget consultations.

According to the Centre's estimates, there will be a $12 billion federal budget surplus next year. "To use the surplus for a tax cut that would disproportionately benefit the wealthy is Robin Hood in reverse," says Klein. "This surplus is mainly the result of painful spending cuts that have hurt the poor, unemployed and students hardest. To even be talking about across the board tax cuts at a time when child poverty remains near 20% and homelessness is a national emergency is a moral outrage."

According to Marc Lee, tax cuts will also do little to help Canada's economic performance. "Contrary to what we hear from business spokespeople, the economic impact of tax cuts is likely to be modest. Canada's productivity would be better served by lowering interest rates and increasing public investment than by cutting taxes," says Lee.

The Centre's recommendations for the federal budget include:

Social reinvestment and investment in Canadian communities:

double federal transfer payments to the provinces for health, education and welfare over the next two years, and invest in new public services;

invest in the well-being of Canadian children and reduce child poverty: and extra $2 billion per year for the next five years going to increases in the Child Tax Benefit (without allowing a claw-back from those on social assistance), a national child care program, and new spending on early childhood education and social housing;

create a National Investment Fund to finance economic development projects in hard-pressed regions, financed by small but compulsory deposits by the private charter banks;

create new public programs that address the challenges of modern life, such as public home and community care, public pharmacare, and public child care.

Fair tax reform:

increase the basic personal exemption;

index tax brackets to inflation;

increase GST tax credit for adults, and disability tax credits;

tax capital gains at the same rate as employment income

re-establish two upper-income tax brackets, for those earning over $100,000 and $150,000;

put a cap on the deductibility of executive corporate salaries, set at 10 times the average wage.